WENDY HIRSCH

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The unexpected ways behavioral economics can improve organizational change

I believe the role of the implementer is, at least in part, to experiment.  In this post, I share the ups and downs from my experiments applying behavioral economics (BE) insights to implementation efforts, as well as some ideas on why and how to introduce BE to your implementation team. 

First, let me confess that even though I am an avid student of behavioral economics, I have felt exasperated more than once since the release of Daniel Kahneman’s Thinking Fast and Slow when – seemingly out of the blue – colleagues, executives and consultants start talking about System 1 and System 2 thinking. “Really? Here? Now? This is what you are going to talk about?”  I think the risk of over enthusiasm and misapplication of insights from BE is real, particularly for those looking for a quick fix and/or aiming to be “the smartest person in the room.”

There are other important cautions against blindly applying BE insights, such as the spirited debates now underway on the replicability of findings (lab to field and lab to lab), the generalizability of BE research findings across cultures (West versus East), as well as uneasiness about appearing to “manipulate” people to act in certain ways (Samson, 2016; Etzioni, 2011).

Even with these cautions, I still advocate for raising awareness of BE concepts among implementation teams.  

The reasons may not be what you think.

It's about us, not them. 

It’s not primarily to harness BE to influence staff to take actions aligned with whatever change is being implemented. 

It’s first and foremost to provide a new lens through which the implementation team can view its own decisions and actions. Introducing ideas from BE research can get the team to pause and think.  Asking themselves questions such as:  “What if we tried it a different way?"  "What might we change in our approach, if we applied these ideas?”  "Why have we decided to do it this way, versus that way?”  

Not to mention making the team aware of the biases that can affect the quality of their planning and functioning as a team (e.g., overconfidence/planning fallacy, self-serving bias).

Second, understanding BE concepts can help to reduce a pejorative view of change resistors. They are probably not “flawed” or “difficult” people.  They are more likely just people, acting in fairly predictable ways (e.g., status quo bias, loss aversion.)

Third, insights from BE can help to set realistic expectations within the team about the inherent difficultly of the change leadership task. As Alain Samson writes in the informative, Behavioral Economics Guide 2016:

“…the actual implementation of ideas often poses substantial challenges and introducing change is fraught with difficulty. According to [Daniel] Kahneman, this is especially true if change goes against established procedures, and if stakeholder’s status, prestige or power is at stake.”

Finally, in my work, I view BE as a complementary tool, not an alternative to other methods. Understanding context is essential — don’t throw away that stakeholder analysis!  As Crawford Hollingsworth and Liz Barker write in an article on the practical application of BE:

“Before we can set about changing behavior, it is crucial to understand existing behavior, the surrounding context and factors — the external triggers, internal biases and perceptions — which might be influencing behavior” (2016).

 As much as we might like them to be, BE insights are not all purpose solutions, ready-made for any context.

How to introduce behavioral economics to your team.   

There is no shortage of resources on BE that you can use with your team, from books to articles to lists. If you aren’t quite ready to start a book club, how about flashcards?

Offered free by the design firm Artefact, the behavior change strategy cards are a simplified version of a toolkit (also free) developed by a group of students at the IIT Institute of Design. Each card shares an insight from BE that can be used to inform design decisions. The deck has 20+ cards. 

I've found it can be useful to ask team members to choose 1 - 2 insights they want to focus on to avoid being overwhelmed.  In teams I’ve worked with, we’ve used the insights to frame team discussions on overall approach, roll-out strategy, and staff engagement, among other things.  At least a few team members also starting using the strategy cards as a resource in an ongoing way, beyond any formal discussions we had as a team. 

Prefer a little light reading?  Below are a few short articles that can spur team discussion on BE and it's application potential in their efforts. 

  • This article from by two Harvard professors, John Beshears and Francesca Gino, provides a method for deciding if the problem is appropriate for application of BE insights and an approach for applying these insights.

  • The free Behavioral Economics Guide 2016 offers an entire section on applying BE insights. From that, two articles in particular are relatively easy reads that provide practical information on applying BE insights — one from The Ogilvy Change Team (p.82) and the other from two marketing professors at Yale (p. 90). (You can find the guides for subsequent years here.)

 

Sharing Experiences: The good, the bad & the ugly.      

As noted above, in my implementation efforts, I feel it’s important to experiment with new methods and ideas. As with all experimentation, things don’t always work out as planned or hoped, but they do always produce the opportunity to learn! 

Below, I share an overarching lesson, BE insights applied (largely drawn from the Artefact card deck mentioned above), and a brief description of how the application played out in my own experience and/or those I’ve observed.   

LESSON: You may not be the best spokesperson for the change effort you are leading.

  • BE Insight: Get the user to make an argument for the desired outcome. This insight draws on a body of research from the 1960 & 1970’s that found that “playing the role” of an advocate for a particular point of view influenced people’s actual views on a topic. (Elms, 1966; Ingersol, 1973)

  • BE Insight: We are more receptive to influence from in-group members. This insight relates to social identity theory. Research in this area has found, as noted in a literature review on social identity, collaboration and organizational silos, “…shared social identity underpins effective communication — not only does information flow less readily across salient intergroup boundaries...but we are more receptive to influence from in-group members, as we assume that they see the world as we do.” (Kreindler, 2012).

  • Application Experience I learned this lesson the hard way, when I was leading a multi-year process change effort. We engaged a mixed-level, representative working group to help identify improvements to processes that would be implemented in the coming year. However, when it came to sharing the group’s final recommendations with a broader set of middle-managers, I gave the presentation. (I did not want to make an additional ask of the working group members.)

Long story short, the conversation did not go well…in fact, it was just short of chaotic. I truly hope I can say it was the worst interaction with a group that I will ever have…because I really don’t care to have any worse!

The good news…immediately after the discussion ended, two members of the work group, who were also part of the middle management group, approach me and said (paraphrasing here), “We should have led that presentation, or at least introduced it. We understand why these tradeoffs were made, we were part of it.  And, these are our peers…it would have been a lot less brutal!”  How great is that?!  While personally unpleasant, the situation led to learning for all of us, which had lasting impacts. 

During that rollout and in future efforts, working group members took the lead in advocating for their recommendations to their peer groups as well as superiors, with good success.

Lesson: Optimize your schedule for how it will make people feel.     

  • BE Insight: Break large gains into multiple smaller gains. Combine small losses into one larger loss. These insights relate to the concepts of loss aversion and time discounting, which help to explain the differential values people put on losses and gains. “It is thought that the pain of losing is psychologically about twice as powerful as the pleasure of gaining” (BEG, 2016).

  • BE Insight: Introduce a peak and end on a high note. This insight comes from the research of Kahneman and Tversky: “According to the peak-end rule, our memory of past experience (pleasant or unpleasant) does not correspond to an average level of positive or negative feelings, but to the most extreme point and the end of the episode.” (BEG, 2016).

  • Application Experience: I have been cursorily involved with several, large-scale system implementations that, likely not by design, continuously took resources away from staff, while promising “amazing” benefits that would come once the future system was implemented….some 12-18 months later. It’s very hard to get support (and compliance) based on promised future benefits, particularly when losses are immediate and painful.

Learning from these efforts, I encouraged implementation teams to regularly ask themselves the questions: “What are we taking from people away? When? What are we providing? When?  Is this optimal? Can we adjust the schedule to make it any better for the end user? (For such discussions, this worksheet from Brains, Behavior & Design can be useful.)

Perhaps you’ve had the experience of planning for roll-out solely based on the earliest point something would be "ready".  I've found, we are almost pre-programmed to assume that sooner is always better. What if planned delay allowed you to better optimize rollout, (e.g., to couple a loss with a larger gain) ?

Finally, some ‘high note’ examples.  In one organization I worked with, the general descriptor used for a past process roll-out was “traumatizing”.  Was it really that bad?  In the big scheme of things, probably not.  But as I understand it, little to nothing was done during the roll-out to “reduce the trauma,” nor was there any discernible high note for those impacted.  It was a slog.  Alternatively, on another experience, while stakeholders never praised the process implementation outright, they were so excited about a new resource made available as part of the roll-out that it became their peak experience — and something they regularly talked positively about.  

If you feel, as I do, that implementation success is at least partly measured by stakeholder satisfaction with both outcomes and the implementation process, experimenting with the application of such BE insights can be worthwhile.

Lesson:  Make the desired action clear and as easy as possible to undertake.

  • BE Insight: Make the desired action the default option.

  • BE Insight: Call attention to the desired option. These insights relate to choice architecture, which involves designing the environment in which people make choices or decisions. According to Richard Thaler, one of those who coined the term: “If anything you do influences the way people choose, then you are a choice architect...Choice architects must choose something. You have to meddle” (Rockrohr, 2008). Meddling can take a variety forms, such as: “defaults, expecting error, understanding mappings, giving feedback, structuring complex choices, and creating incentives” (Thaler et al, 2010).

  • Application Experience: For the last six years, I’ve had a monthly subscription to a yoga website. It helps me keep a consistent practice, regardless of my work or travel schedule. I love it! A few years ago, the company released a new version of the site, which introduced a novel way of organizing, searching for and saving courses. I used it once and I hated it! Much to my surprise, the old site remained accessible, so I kept using it…for years. I made no change in my behavior whatsoever, because I didn’t have to.

I pretty much forgot the new site even existed, until I got a survey from the company asking me to explain why I kept using the old site.  That was followed up a few weeks ago with an email explaining changes they had made to the new site to make it more user-friendly for fans of the old site. The email also included an announcement that the old site would be taken off-line. (As a professional implementer, my only thought was, "About time!" Why would you maintain two sites for years?)

As it turns out, the status quo bias holds true for me.  If I don’t have to change, I won’t. If I don’t know what action you want me to take, I'll just do what I'm used to doing.  It took a few years, but it seems the yoga company learned this. What I like about their transition strategy, is that they not only took away my alternate option (old site), but they learned why I preferred the alternative and incorporated some of that functionality into the new site, making the transition easier for me.

Like the example above, I have observed more than a few implementations in my professional life, where the desired action is not clear.  Either because the foundational questions about the implementation had not been truly answered (e.g., What, exactly, are we implementing and why?”), or because the change team or leaders were reluctant, or perhaps even afraid, to make the desired action explicit. Clarity often requires courage. Both are necessary for successful implementation. 

Finally, I have also seen instances where the desired action is clear, but the related process has been developed more to meet the needs of those maintaining it,  than those using it.  As a result, people may know what they are "supposed" to do, but it’s so hard to do it with the given process, they give up. Who can blame them?

Start small. 

As the experiences above hopefully demonstrate, you don't have to start a BE revolution in your organization to realize benefits from applying these insights.  Start with your team, try a few small experiments, learn and build from there.  

Have an experience with the application of BE that we can learn from?  Please share it in the comments section below. We'll all benefit from your contribution to the conversation. 

 

References & Resources

"About 40% of Economics Experiments Fail Replication Survey." Science. 03 Mar. 2016. Web. See here. 

 "A Toolkit to Help Designers and Business Leaders Understand and Influence Consumer Decisions." Brains, Behavior & Design. Web. See here. 

Behfar, Kristin, and Jenny Craddock. "Credit Where Credit Is Due: Creating Teams Without a Self-Serving Bias." Darden Ideas to Action.  29 July 2016. Web. See here. 

Beshears, John, and Francesca Gino. "Leaders as Decision Architects." Harvard Business Review.  2015. Web. See here. 

Elms, Alan C. "Influence of Fantasy Ability on Attitude Change through Role Playing." Journal of Personality and Social Psychology 4.1 (1966): 36-43. Web. See here. 

Etzioni, Amitai. "Behavioural Economics: Next Steps." J Consum Policy Journal of Consumer Policy 34.3 (2011): 277-87. Web.  See here. 

Hollingsworth, C and Baker, L. (2016). "How to Apply Behavioural Science with Success: Learning from Application Around the World"  In A. Samson (Ed.), The Behavioral Economics Guide 2016 (with an introduction by Gerd Gigerenzer) (pp. 30-36). Web.

Ingersoll, Virginia Hill. (1973).  "Role Playing, Attitude Change, and Behavior." Organizational Behavior and Human Performance 10.2 (1973): 157-74. Web.  See here. 

Kreindler, Sara A., Damien A. Dowd, Noah Dana Star, and Tania Gottschalk. (2012). "Silos and Social Identity: The Social Identity Approach as a Framework for Understanding and Overcoming Divisions in Health Care." Milbank Quarterly 90.2 (2012): 347-74. Web. See here. 

The Olgivy Change Team. (2016).  "Behaviour Change: What to Watch Out For."   In A. Samson (Ed.), The Behavioral Economics Guide 2016 (with an introduction by Gerd Gigerenzer) (pp. 82-89). Web.  See here. 

Chance, Zoë,  Dhar, Ravi. (2016) "Making the Best Choice the Easy Choice: Applying the 4Ps Framework for Behavior Change at Google."   In A. Samson (Ed.), The Behavioral Economics Guide 2016 (with an introduction by Gerd Gigerenzer) (pp. 82-89). Web.  See here. 

 Pfar, Nikki. "Behavior Change Strategy Cards - Artefact." Artefact. Web.  See here. 

Samson, A. (Ed.)(2016). The Behavioral Economics Guide 2016 (with an introduction by Gerd Gigerenzer).  Web.  See here. 

Samson, A. (Ed.)(2015). The Behavioral Economics Guide 2015 (with an introduction by Dan Ariely).  See here.

Samson, A. (Ed.)(2014). "An Introduction to Behavioral Economics."  In A. Samson (Ed.), The Behavioral Economics Guide 2014 (with a foreword by George Loewenstein and Rory Sutherland) (1st ed.)(pp. 1-9). Web. See here.

Rockrohr, Phil. (2008).  "Thaler Explains How "Choice Architecture" Makes the World a Better Place,"" The 56th Annual Management Conference. Web.  See here. 

"Selected Behavioral Science Concepts." Behavioraleconomics.com The BE Hub. Web. See here

Thaler, Richard H., Cass R. Sunstein, and John P. Balz. (2010).  "Choice Architecture."  SSRN Electronic Journal SSRN Journal (2010). Web.  See here.